C&L, Cranes & Lifting, Features

Tough financing environment continues

Banks are still being difficult when it comes to the financing of crane deals. Jeff Wilson, senior partner Equipment Finance for Finlease, discusses ways crane companies can still have financing approved quickly. Cranes and Lifting finds out more.

Banks are still being difficult when it comes to the financing of crane deals. Jeff Wilson, senior partner Equipment Finance for Finlease, discusses ways crane companies can still have financing approved quickly. Cranes and Lifting finds out more.

The Royal Commission into Misconduct in the Banking, Superannuation and Financial Service Industry was a tough examination for Australia’s banks, insurers and financial services companies. A year since the commissioner, Kenneth Hayne, announced recommendations to fix the industry, there has been immense upheaval with billions of dollars of stolen money being returned to customers and multiple court cases underway.

Jeff Wilson, senior partner, Equipment Finance for Finlease provides insights into how financial institutions are viewing the crane sector.

“From my perspective, the banks are still being difficult when it comes to the financing of crane deals. The primary lenders are being challenging and problematic and a number of primary lenders have culled staff which is affecting turnaround times and the speed in which they can deliver approvals. The current situation is a combination of a number of factors. A couple of the major banks recently retrenched a stack of people in their sales areas, including business development managers and their assistants,” Wilson said.

“Typically, Finlease used to deal with a business banking centre that would have had up to seven business bankers and we’d be able to call about a commercial loan or financing enquiry. Those seven bankers would have had an assistant who managed the paperwork and back office work relating to the enquiry. This allowed the business development manager to get on with the role of selling financial packages.

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“Today, these banks have retrenched two or three sales staff and also removed their assistants. They’ve also reduced a lot of the bonuses and incentives from the staff and this is negatively affecting the mood and moral of the remaining team. In turn, the remaining bankers have little incentive to work the extra hours they used to, they’re becoming more nine to five bankers,” he said.

Wilson can understand why morale is currently low within these banking teams.

“It’s understandably frustrating for the teams who must be thinking they weren’t the ones that created the mess that led to the Banking Royal Commission. Their business units and their customers continue to perform really well, and they are still reaching budgets and targets and yet they’ve seen staff taken, workloads increased and bonuses taken away. Who wouldn’t feel disillusioned?” he said.

“In a roundabout way this situation opens the door further for a business like Finlease. We are dealing with specialised departments we’re not dealing with the day to day bankers in a business banking centre and because we retain the resources ,and we will always will, we are able to put together applications in the complete format and present it to the bank with all the required information. This makes it a whole lot easier for them to make the decision to approve the finance. In effect, we are presenting a completed package rather than the bankers having to source the required paperwork try and formulate the package. We are now in a role where we are streamlining the application process for both our customer and the bank,” Wilson said.

Wilson suggests that by using the resources in a company like Finlease, a crane hire business will see an application processed in half the time compared to dealing directly with the bank.

“In today’s lending environment, if a crane hire business came to Finlease with an application for finance, we would be able to deliver in half the time compared to if they had gone directly to the bank. That timing can make a lot of difference.

“The information prepared by Finlease is enough for the bank to make a decision to approve the finance or not. We go to greater lengths to ensure the bank has everything required for its justification process. We prepare everything on behalf of the customer and from my perspective, with 26 years experience in the industry, we know the criteria, we know exactly what the banks require and the questions they are going to ask,” he said.

The pipeline of work is building for the crane sector. The construction of massive infrastructure projects continues in most states, Western Australia is seeing a resources sector resurgence and wind farm construction is booming in every state. Wilson examines the current lending environment and what crane hire businesses need to be aware of when financing fleet upgrades or purchasing new machines.

“There is a little uncertainty with exchange rates at the moment, especially around the Euro. Crane prices are relative to exchange rates and the Euro impacts on a lot of crane sales due to number of the crane brands sold out of Europe. In early February, we saw the Euro crash a little, probably as a result in a lack of confidence around Brexit and maybe the coronavirus. Once the markets see that everything is going to be OK, I think things will get back to normal. I can also see a construction boom on the horizon. Following the devastation from recent natural disasters, there is going to be a need for a major rebuilding program,” he said.

Recently, the industry has seen an interesting development with crane hire companies bringing in massive sized, second hand cranes. Wilson explains how the finance on used cranes compared to new works.

“Finance on used cranes doesn’t really differ too much. The criteria we look at is around the age of the crane and confirmation that it has the correct certifications in place. If you bring in a three year old machine there won’t be a problem. If you’re bringing in a 12-year-old machine, then a few more questions will be asked around what the owner intends to do to bring the machine up to compliance levels, so it won’t be quite so straightforward with the older machines.

According to Wilson, the overall message to the market is to be prepared for a busy period and if you think you will be in the market for new or used cranes, keep your financial records as up to date as possible.

“In my experience, all the indicators show we are looking at the prospect of a mini boom for the cranes sector, and I would say to crane businesses, if you are ready to purchase make sure you keep all your financial records up to date and accessible.

“With the way the banks are operating at the moment there could be delays in sourcing finance so if you are going to be in the frame to expand your fleet or replace machines, you should plan ahead, but keeping your financial information totally up to date puts you in a better position for a quicker turn around in terms of approvals,” he said.

“This is something Finlease can help with. We continue conversations with accountants and working with the customer to ensure they’ve got their financials in order. Right at the moment, I’m working on a deal and the customer is looking at buying a reasonably sized crane.

“I told them we would definitely need the 2019 financials, which we already have on file, and we are also going to require the year to date financials, up to at least the end of December. Within half an hour that information was sent together with their portals and everything else.

This clearly shows the business is performing well and it indicates to the finance company that by keeping good up to date records, you are managing the business, the cash flow within the business and the general affairs of the business,” Wilson said.

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